Lehman Brothers removes finance, operating chiefs

The ouster of Chief Financial Officer Erin Callan and Chief Operating Officer Joseph Gregory was an attempt to quell investor anger that Lehman's leadership has failed them. But, with a four-day stock plunge that wiped $4.5 billion from the investment bank's market value, it was unclear if the upheaval will be enough to satisfy critics.

"These people deserve to be fired," said Dick Bove, an analyst with Ladenburg, Thalmann & Co. "Their mistakes cost their shareholders billions of dollars in wealth." Lehman shares fell 4.4 percent Thursday to $22.70 and are down 30 percent this week. The decline is a blow to investors who bought into a stock offering at $28 earlier this week--including BlackRock Inc. and former AIG chief Hank Greenberg.

Richard Fuld, who took the company public in 1994, has kept a low profile in recent days by refusing interviews and commenting only through a statement about the dismissals. There is growing speculation that Fuld--the Street's longest serving CEO--might scramble to find a major outside investor or negotiate a sale to avoid his own demise by Lehman's board.

Names from private-equity firm Blackstone Group Inc. to global bank HSBC Holdings PLC have been bandied about as possible suitors should Fuld want to arrange a buyer, though none are commenting on the possibility. Most analysts are confident that Lehman can survive on its own without a suitor, given the underlying strength of its business.

And while Lehman might have bought itself some more time by shaking up its top ranks, the question remains how much it has left.

"I think they have a few options, but they are becoming more and more limited as the stock is pressured," said Matthew Albrecht, financials analyst for Standard & Poor's. "It is hard to rule anything out at this point. Confidence in the firm is the paramount issue, and if your counterparties and clients don't have confidence than you can't do business in this market."

In Washington, Sen. Richard Shelby of Alabama, the Senate Banking Committee's senior Republican, said "I hope that Lehman comes out of the storm OK."

"It's very interesting in that Lehman Brothers ... keeps assuring everyone that they've got adequate capital and then they go to the market to get more capital," Shelby said in a telephone interview. "They're saying one thing and doing another in some sense and that has alarmed some people."

Confidence in the company eroded after it pre-announced a nearly $3 billion loss for the second quarter and unveiled a plan to raise $6 billion of fresh capital. Callan spent Monday trying to convince analysts that Lehman's books were in order and that the fresh dose of capital would allow traders to pursue new opportunities. But her pep talk failed and shares began to plummet toward a record low.